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1/8 IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 1ST DAY OF AUGUST 2018
PRESENT
THE HON’BLE DR.JUSTICE VINEET KOTHARI
AND
THE HON’BLE MRS.JUSTICE S.SUJATHA
I.T.A. No.357/2016
BETWEEN : 1. THE PR. COMMISSIONER
OF INCOME-TAX
5TH FLOOR, BMTC BUILDING
80 FEET ROAD, KORMANGALA
BANGALORE-560095.
THE DEPUTY COMMISSIONER
OF INCOME-TAX
CIRCLE-3[1][2], 2ND FLOOR
BMTC BUILDING
80 FEET ROAD, KORMANGALA
BANGALORE-560095.
...APPELLANTS
(BY SRI K.V.ARAVIND, ADV.)
AND : M/s. GUHRING INDIA PVT. LTD., PLOT No.129, BOMMASANDRA INDL. AREA, PHASE IV, ANEKAL TALUK, HOSUR ROAD BANGALORE-560099 PAN: AAABCG 0789L.
…RESPONDENT
(BY SRI SANDEEP HUILGOL, ADV. FOR SRI T.SURYANARAYANA, ADV.)
Date of Judgment 01-08-2018, ITA No.357/2016 The Pr. Commissioner of Income-tax & Another Vs. M/s. Guhring India Pvt. Ltd.,
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THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 28.10.2015 PASSED IN ITA No.217/BANG/2015, FOR THE ASSESSMENT YEAR 2010-11, ANNEXURE-D, PRAYING TO: 1. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE; 2. ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT, BANGALORE IN ITA No.217/BANG/2015 DATED 28.10.2015, ANNEXURE-D, CONFIRMING THE ORDER OF THE DRP AND CONFIRM THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3[1][2], BENGALURU; AND ETC.
THIS APPEAL COMING ON FOR HEARING, THIS DAY, S. SUJATHA, J., DELIVERED THE FOLLOWING:
J U D G M E N T
Mr. K.V.Aravind, Adv. for Appellants – Revenue. Mr. Sandeep Huilgol, Adv. for Mr. T.Suryanarayana, Adv. for Respondent – Assessee.
This Appeal is filed by the Revenue purportedly raising substantial questions of law arising from the Order of the Income Tax Appellate Tribunal, Bangalore Bench ‘A’, Bangalore, in IT[TP]A No.217/Bang/2015 dated 28.10.2015, relating to the Assessment Year 2010-11.
The appeal has been admitted on 06.12.2017 to consider the following substantial question of law:
Date of Judgment 01-08-2018, ITA No.357/2016 The Pr. Commissioner of Income-tax & Another Vs. M/s. Guhring India Pvt. Ltd.,
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“Whether on the facts and in the circumstances of the case, the Tribunal is right in law in holding that foreign exchange gains/loss have to be considered as operating revenue in nature when as per Rule 10B[2][d], the net margin realized by the assessee in its international transactions shall alone be computed for comparability analysis under TNMM and Foreign exchange gain/loss does not form part of the profits realized from international transactions as the billing by the assessee is done in US dollars and the foreign exchange gain/loss is not borne by the AE?”
The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and Respondent-Assessee, has returned the findings as under: “5.3 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial decisions cited and placed reliance upon. We observe that it has not been disputed that the foreign exchange gain/loss has arisen as a consequence of the realization of the consideration in the course of business operation
Date of Judgment 01-08-2018, ITA No.357/2016 The Pr. Commissioner of Income-tax & Another Vs. M/s. Guhring India Pvt. Ltd.,
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for rendering software development of the assessee and therefore there is no reason for its exclusion from the operating revenues for the purpose of calculating the operating margin of the assessee. The DRP in its order at para 2.7 thereof, following the order of the co-ordinate bench of this Tribunal in the case of SAP Labs India Pvt. Ltd., [supra] has held and directed the A.O to consider foreign exchange fluctuation as operating in nature in respect of the assessee as well as the comparable companies while determining the margins in the case on hand. We find that this proposition has been upheld by a co-ordinate bench of this Tribunal in the case of NXP Semi Conductors India Pvt. Ltd., in IT[TP]A No.1662/Bang/2014 dated 12.08.2015 wherein at para 4.3 thereof it has been held as under :-
“xxxxx”
5.4 Following he decision of the co- ordinate benches of this Tribunal in the cases of Sap Labs India [Pvt.] Ltd., [supra], Triology E Business Software India Pvt. Ltd., [supra], Mindteck [India] Ltd., [supra] and NXP Semi Conductors India Pvt. Ltd., [supra], we hold that operating revenue should be computed by including the foreign exchange gain.
Date of Judgment 01-08-2018, ITA No.357/2016 The Pr. Commissioner of Income-tax & Another Vs. M/s. Guhring India Pvt. Ltd.,
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Consequently, the grounds at S.Nos.2 & 3 raised by revenue are dismissed.”
The controversy involved herein is no more res integra in view of the decision of this Court in I.T.A. Nos.536/2015 c/w 537/2015 dated 25.06.2018 [Prl. Commissioner of Income Tax & Anr. V/s. M/s.Softbrands India Pvt. Ltd.,] wherein it has been observed that unless the finding of the Tribunal is found ex facie perverse, the Appeal u/s. 260-A of the Act, is not maintainable. The relevant portion of the Judgment is quoted below for ready reference: “Conclusion: 55.
A substantial quantum of international trade and transactions depends upon the fair and quick judicial dispensation in such cases. Had it been a case of substantial question of interpretation of provisions of Double Taxation Avoidance Treaties (DTAA), interpretation of provisions of the Income Tax Act or Overriding Effect of the Treaties over the Domestic Legislations or the
Date of Judgment 01-08-2018, ITA No.357/2016 The Pr. Commissioner of Income-tax & Another Vs. M/s. Guhring India Pvt. Ltd.,
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questions like Treaty Shopping, Base Erosion and Profit Shifting (BEPS), Transfer of Shares in Tax Havens (like in the case of Vodafone etc.), if based on relevant facts, such substantial questions of law could be raised before the High Court under Section 260-A of the Act, the Courts could have embarked upon such exercise of framing and answering such substantial question of law. On the other hand, the appeals of the present tenor as to whether the comparables have been rightly picked up or not, Filters for arriving at the correct list of comparables have been rightly applied or not, do not in our considered opinion, give rise to any substantial question of law.
We are therefore of the considered opinion that the present appeals filed by the Revenue do not give rise to any substantial question of law and the suggested substantial questions of law do not meet the requirements of Section 260-A of the Act and thus the appeals filed by the Revenue are
Date of Judgment 01-08-2018, ITA No.357/2016 The Pr. Commissioner of Income-tax & Another Vs. M/s. Guhring India Pvt. Ltd.,
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found to be devoid of merit and the same are liable to be dismissed.
We make it clear that the same yardsticks and parameters will have to be applied, even if such appeals are filed by the Assessees, because, there may be cases where the Tribunal giving its own reasons and findings has found certain comparables to be good comparables to arrive at an ‘Arm’s Length Price’ in the case of the assessees with which the assessees may not be satisfied and have filed such appeals before this Court. Therefore we clarify that mere dissatisfaction with the findings of facts arrived at by the learned Tribunal is not at all a sufficient reason to invoke Section 260-A of the Act before this Court.
The appeals filed by the Revenue are therefore dismissed with no order as to costs.”
In the circumstances, having heard the learned Counsel appearing for both the sides, we are of
Date of Judgment 01-08-2018, ITA No.357/2016 The Pr. Commissioner of Income-tax & Another Vs. M/s. Guhring India Pvt. Ltd.,
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the considered opinion that no substantial question of law arises for consideration in the present case.
Hence, the Appeal filed by the Appellants- Revenue is liable to be dismissed and is accordingly dismissed. No costs.
Sd/- JUDGE
Sd/- JUDGE
NC.